STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2013

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

6. STOCKHOLDERS' EQUITY

In 2002, the Company issued 3,350,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) to Celgene. The value of the common stock at the date the Series A Preferred Stock was issued was $9.46. The Series A Preferred Stock was convertible, at the option of Celgene, at any time, into common stock at an initial per common share conversion price of $11.00 (1 share of preferred converts into .45 shares of common). The conversion price was subject to change for certain dilutive events, as defined. The Series A Preferred Stock accrued and accumulated dividends at a rate of 6% and participated in dividends declared and paid on the common stock, if any. In connection with the 2012 Financing, as described below, and upon stockholder approval of the 2012 Financing at the 2012 annual meeting on April 30, 2012, Celgene converted all of its preferred stock to an aggregate of 1,522,727 shares of common stock, pursuant to the terms and conditions of the Series A Preferred Stock. As a result, as of May 1, 2012, there is no Series A Preferred Stock or any class of preferred stock outstanding. As of April 30, 2012, cumulative unpaid preferred stock dividends totaled $9,380,000, or $2.80 per share. In connection with the stockholder approval of the 2012 Financing, Celgene waived all accrued dividends on the Series A Preferred Stock, and Celgene is no longer entitled to any liquidation preference on its shares.

2013 FINANCING

As described in Note 1 and in connection with the 2013 Financing, on March 1, 2013, the Company entered into a definitive agreement with certain investors (collectively, the “2013 Investors”) for a financing in the aggregate amount of approximately $10.8 million.  In connection with the 2013 Financing, the Company entered into a Securities Purchase Agreement with the 2013 Investors pursuant to which the Company agreed to sell in a transaction registered under the Securities Act of 1933, as amended, 4,495,828 shares of the Company’s common stock and warrants to purchase up to an aggregate of 2,247,912 shares of common stock (the “2013 Warrants”).  The 2013 Warrants cover a number of shares of common stock equal to 50% of the number of shares purchased by each 2013 Investor.  The 2013 Warrants have an exercise price of $2.91 per share and became exercisable on September 4, 2013 and expire on September 4, 2016. The fair value of the 2013 Warrants issued is $3,574,180, calculated using the Black-Scholes-Merton valuation model value of $1.59 with an expected and contractual life of 3.5 years, an assumed volatility of 102.3%, and a risk-free interest rate of 0.40%. The Company completed the closings on the 2013 Financing on March 14, 2013 and received net proceeds of approximately $10.3 million.

In connection with the 2013 Financing, the Company also issued a warrant to its placement agent to purchase up to 61,250 shares of common stock at an exercise price of $3.00 per share of common stock (the “Agent’s Warrant”). The Agent’s Warrant became exercisable on September 4, 2013 and will expire on October 9, 2017. The fair value of the Agent’s Warrant issued is $115,150, calculated using the Black-Scholes-Merton valuation model value of $1.88 with an expected and contractual life of 4.6 years, an assumed volatility of 111.9%, and a risk-free interest rate of 0.85%.

2012 FINANCING

As described in Note 1 and in connection with the 2012 Financing, on January 20, 2012, the Company entered into a Convertible Note and Warrant Purchase Agreement (the “Purchase Agreement”) with certain strategic accredited investors (the “Investors”), pursuant to which the Company issued and sold to the Investors, in a private placement, subordinated mandatorily convertible promissory notes (collectively, the “Notes”) with an aggregate principal amount of $10 million. The Company also issued warrants (the “2012 Warrants”) to the Investors to purchase an aggregate of 1,739,132 shares of the Company's common stock, par value $0.01 per share. The 2012 Warrants cover a number of shares of common stock equal to 20% of the principal amount of the Notes purchased by each Investor, divided by $1.15.  The 2012 Warrants have an exercise price of $1.40 per share and became exercisable on July 29, 2012 and expire on July 29, 2017. The relative fair value of the 2012 Warrants issued was $2,155,527, calculated using the Black-Scholes-Merton valuation model value of $1.58 with an expected and contractual life of 5.5 years, an assumed volatility of 103%, and a risk-free interest rate of 0.71%. The 2012 Warrants were recorded as additional paid-in-capital and a discount on the Notes of $2,155,527 was fully amortized as non-cash interest expense during the year ended December 31, 2012 as a result of the conversion of the Notes.

The 2012 Financing was completed on February 2, 2012. The Company received net proceeds of approximately $9.3 million. The Company paid one of the investors, in a related-party transaction, a fee in the amount of 6% of the aggregate amount raised in the 2012 Financing. In connection with the 2012 Financing, the Company incurred a total of $683,955 of debt issuance costs. All debt issuance costs were fully amortized and recorded as interest expense upon conversion of the Notes in the second quarter of 2012.

The Company received approval of the 2012 Financing from the Company's stockholders at the 2012 annual stockholders meeting held on April 30, 2012. On May 1, 2012, the Notes, including accrued interest of $144,658, automatically and immediately converted into 8,821,431 shares of common stock and the 2012 Warrants became exercisable as of July 29, 2012.  The Notes bore an interest rate of 6% and converted at a conversion price of $1.15 per share.  The conversion price reflected the 10-day average closing sale price of the Company’s common stock ended on January 20, 2012.

The Notes were not convertible, and the 2012 Warrants were not exercisable, prior to receiving stockholder approval. The Notes contained a contingent beneficial conversion feature as the conversion price of the shares was less than the share price on the date of the Notes issuance. The beneficial conversion feature was valued at $7,057,153 and was recorded as non-cash interest expense and additional paid-in-capital in the second quarter of 2012, upon removal of the contingency and conversion of the Notes on May 1, 2012.